Annual report Mount Porter exploration retention licence 116 year ended 11 September 2008

Abstract

There has been no on-ground exploration activity carried out over ERL 116 during the year ended 11 September 2008. Expenditure against the licence during this period totalled $8,096, and was largely administration costs. This follows expenditure by Arafura of approximately $250,000 on the same tenement during 2003- 2007. Most of this expenditure would now be apportioned to the area occupied by ML 23839, excised from ERL 116 and granted in February 2005. As you are aware, Arafura Resources is an organisation whose focus is on building a long-term rare earths (REE) production and marketing business, centred on our Nolans Project and associated strategic land position in the Reynolds Range. Consequently over the past year, Arafura has been attempting to either divest its non-core exploration properties, or seek suitable partners to help develop them through joint ventures. The recent global upheaval in credit markets makes it even more compelling for Arafura to sharpen its focus on its core business, as financial conditions deteriorate and Arafura's ability to fund its (non-REE) exploration portfolio to an appropriate level becomes increasingly difficult to execute and, indeed, justify. Arafura's gold interests, represented by the Mt Porter (ML 23839 and ERL 116) and Kurinelli (AC 74) projects, were assessed by several parties during 2008 but to this point no firm commercial proposals have been presented. In addition, Arafura has registered its interest with the GBS Gold Australia administrators to explore strategies which may assist in our determination to extract value from the Mt Porter Project. In light of our position, Arafura proposes that no on-ground activity (and therefore no exploration expenditure, excepting administration costs) be undertaken during the next year of exploration on ERL 116, and furthermore respectfully requests that the Minister for Primary Industry, Fisheries and Resources set the expenditure covenant to zero for the forthcoming year.